Pension reform paves the way for the target-date funds market in Mainland China

We take a look at what China’s recent guidelines on the individual commercial pension market mean for target-date funds and other retirement investment products.

Nov 1, 2018 | Nixon Mak

China recently saw the introduction of the first pension-target funds, marking a key milestone in the growth of the Mainland’s individual commercial pension market and its asset-management industry. This inaugural batch of 14 funds are all funds of funds (FOF) that pursue either target-date or target-risk strategies – in accordance with guidelines from the China Securities Regulatory Commission (CSRC).

Invesco collaborated with a team of students from the Cambridge Judge Business School’s Master of Finance program and conducted a study on what these developments could mean for China’s fund-of-funds market. The team believes that target-date funds will be one of the more popular pension products in China, given their unique allocation structure and strategy they pursue. Based on the study, these funds will likely reach a size of up to 1.88 trillion yuan.

But these figures are only early estimates – we see upside potential for the broader market for individual commercial pension schemes as Chinese households transition from savings to investments as a means to preserve and grow wealth. At the same time, we also anticipate that the individual commercial pension market will receive more policy support from Beijing so that it can act as a reliable and robust system to meet the retirement needs of China’s ageing population. We think there is great potential for stakeholders to take advantage of the growth in China’s individual commercial pension market.


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